An analysis and evaluation of Lego’s global marketing strategy

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An analysis and evaluation of Lego’s global marketing strategy

Executive Summary

The research focuses on how Lego can attract and retain consumers. In addition to that, the research will also examine some of the strategies which can be implemented to compete effectively. The marketing strategy is divided into 4 main parts. The first part is an introduction to business. This part focuses on the company profile such as location, founder, and product line. The market environment is the second part of the research and focuses on the internal and external environment. The main tool used in the analysis of the external environment is PESTLE. This section has covered various political, social, technological, legal, environmental, and economic factors affecting the Lego Group.

The third section of this research focuses on market strategies and tactics. In this section, we shall discuss topics like market selection, mode of market entry, and marketing mix. The company targets children between the age of 5 to 12. The company utilizes licensing as a mode of market entry. Lego Group capitalizes on the fact that China is enjoying a season of quiet time with Denmark. The marketing mix employed by the company is 4 Ps. This stands for Product, Place, Price, and Promotion. Strategic positioning contributes to high sales. The report will also provide recommendations to current issues facing the company.

Introduction to the business

To inspire their fans, Lego Group uses imagination. The company is investing in research and innovation. Brand loyalty alongside a strong brand image has contributed to huge sales. Lego Group utilizes brick products to come up with fascinating games for young kids (Andersen & Ross, 2016). The most interesting part of this is that the games can be played by any gender. Children who play these games are very active. In addition to that, it has also increased creativity among youths. The company has also built a strong relationship with its customers through the provision of quality services. Generally, the brand is unquestionable.

Since it is one of the largest producers of toys in the world, Lego Group manufactures a variety of assets. Consumers are convinced that Lego Group is one of the most powerful brands. The company is associated with a very simple logo. It is engulfed with three bright colors that attract the attention of children. The word Lego is associated with good and quality play. In addition to that, it also contributes to powerful imagination. LEGOLAND is also relevant to the brand. The company has created thousands of products since its foundation. Its main customers are children between the age of 5 to 12.

Market Environment opportunities and characteristics

Various factors affect business. Activities of LEGO Group are affected by internal and external factors. It is upon the managers to come up with an organization’s culture and structure. These strategies are meant to give clear guidelines to the employees. The two major business environments are micro and macro. Just like other organizations, LEGO is also affected by internal and external factors such as consumers, suppliers, and competitors. PESTLE analysis can be used to analyze and evaluate internal and external environments of LEGO groups.

PESTLE Analysis

This focuses on the business tactics of the Lego Group. Various external factors are evaluated such as political, economic, social, technological, legal, and environmental.

Political factors

LEGO Group is known for not taking interest intentionally. This is to evade issues related to government affairs. Their activities during various events are a clear indication of this approach (Celli & Gonella, 2015). A Chinese artist named Ai Weiwei was denied mass requests during his performance in Australia. Lego declined the request despite being an issue of political significance. Nevertheless, the artist was not heartbroken by this single act. However, he condemned the act terming it as oppressive. He is still using and promoting products from Lego. Based on a report that was recently published, the Craftsman used Lego’s blocks to come up with representations of political leaders who were jailed.

Economic factors

Following 70 years of constant business with the United States of America, LEGO Group of companies announced that it would shut down its plants. Approximately 1200 occupants were wiped down by the organization leading to monetary ruin. The electronic device was corroding the culture of US consumers (Einwächter & Simon, 2017). The government of the U.S introduced new patterns that were more appealing than toys. It was among the last toy companies which were operating in the United States of America. They had to relocate to Mexico. Based on research, dynamic social culture promotes computer games and discourages conventional toys. LEGO Group saw it wise to quit rather than experiencing huge financial losses.

Social factors

In an attempt to secure the privileges of youngsters, Lego Group is working closely with UNICEF. They are bent on discouraging child abuse. The company has taken a clear position on this issue. Lego has promised to produce varieties of toys based on the fact that youthful capabilities lie on them. Following its partnership with UNICEF, the company has promised to give $8.2 million to invest in children’s welfare. The company believes that children should participate in exercises at tender ages.

Technological factors

Technology is evolving each day. The use of Artificial Intelligence has become of the most popular methods of running businesses. Lego formed a partnership with the Texas instrument and came up with a robot that runs on unrivaled innovation. These robots are controlled by remotes and Bluetooth devices. However, the robot is inaccessible since it’s unavailable for purchase. Because of the constant development of new and advanced toys, LEGO Group has been nicknamed Apple. The company is located in over 100 countries in the world. The vivid arrangement of the Ninjago characters is one of the magnificent works of this company. Most children are fascinated by this arrangement.

Legal factors

Lego Group must be careful when it comes to rules and regulations in various countries. This is because it operates in many countries. The company should examine judicial and government policies in countries where they operate. Different levels of protection are provided for intellectual property rights by different countries. In 2017, two Chinese companies filed a copyright case against the Lego Group. Fortunately, the company won the case. Lego has the opportunity to file many cases against the two Chinese companies. They will be charged for violating the trademark of the Lego Group.

Environmental factors

This is one of the most crucial factors affecting modern businesses. Organizations are encouraged to fight all forms of environmental pollution. Efficient disposal of waste products is one of the keys to success (El Sawy et al., 2016). Modern consumers are more conscious about the business environment. Some of them go to the extent of analyzing the negative impacts of the environment on organizational activities. Lego is bent on producing environmentally friendly products. This can be achieved by reducing its carbon footprint. It has achieved the 100% renewable energy target. The company is working on sustainable plastic wastes management strategies. This is part of their vision of 2030. In addition to that, the company is determined to reduce carbon dioxide emissions. Generally, Logo has implemented strong strategies that will propel it to the next level. The existence of numerous competitors is no longer a threat to this organization.

Market Strategies and Tactics

The LEGO Group is an international company. The company utilizes social media platforms to market its products. YouTube and Facebook are widely used to grow customer base and engage numerous followers. Due to stiff competition, the company employs several marketing strategies and Tactics which can be broken down as shown below;

Market selection

The LEGO Group mainly targets children between the age of 1 to 15 years. In addition to that, the company also sells its products to several adults across the world. Simple toys are meant for children between the age of 1 to 3 while complex toys are meant for children above the age of 10. LEGO Group has also developed advanced games meant for adolescents and adults. There are various tools used in market selection.

One of the key strategies used by LEGO Group is defining generic and product. They focus on the needs of consumers. The principle of generic market defines consumers with similar demands (Sørensen, 2020). B2B is one of the most popular market segments used by this company. International brands like LEGO operates under the principle of customer relationships and engagement. An online community of Lego fans was created to reach many consumers. SWOT analysis can be used to evaluate the current market position of the company.

Strengths

The company has a strong product portfolio. Over the past few years, the company has developed a strong portfolio which has contributed to huge sales. They have formed a partnership with companies such as Disney and Marvel. The Lego-based theme parks is also another strength of the company. They are strategically located in nine different locations across LEGOLAND.

Weaknesses

Production of similar goods has affected sales. The company is facing stiff competition from well-developed companies such as Meccano and Automoblox which produce cheaper products. Logo sells high-quality products that attract high prices. This scares away several consumers.

Opportunities

The LEGO Group has diversified into video games, TV, and Movies. The Lego Movie which was produced in 2014 attracted an income of $470 million. In addition to that, the company also has the opportunity to diversify into other segments.

Threats

The company is facing still competition from Mega Block. Because of the high prices associated with its products, it cannot maintain consumers from all social classes. These consumers will opt for other available options.

Mode of Market Entry

The marketing strategy used by Lego is direct exporting. Lego has identified numerous markets where it exports its products directly. To achieve this, the company has come up with a sales program. The company appoints several agents and distributors to represent them at the international level. Agents and distributors are the face of the company and are expected to represent the company well. When choosing company agents, managers should be careful not to make mistakes that may contribute to losses. Most of its products are exported to Sweden.

Also, it exports products to Norway which has fewer import regulations. The relationship between the Chinese market and the Lego Group can be dated back to the 1980s (Andersen et al., 2013, 130). A sales company was established in China by the LEGO Group in 2012. This was to target Asian wholesalers. Barely a year after, the company declared its interest in building a company in Jiaxing. In 2014, a Hub office was constructed in Shanghai. LEGO Group has been favored by the Chinese market for several years. It has managed to triple its revenue.

Complex technology roll-out has affected various operations of LEGO Group. Chinese legislation requirements have affected the operations of the company. They are committed to legal compliance. The content publishing regulations put in place do not allow Lego apps to be sold in Chinese markets. To solve this problem, they formed a partnership with the Chinese internet company. This has facilitated the provision of digital content to support learners. They are committed to legal compliance.

Market Mix

In the world of toys, Lego is the leading name. The company has introduced modern digital experiences to attract more customers. It incorporates the 4P’s marketing mix in its operations. These include Product, Place, Price, and Promotion.

Products

The company has introduced various games and toys for young kids. These toys and games fit kids from different age groups. In their effort to engage them, they have designed several forms of activities. Young kids are associated with simple ideas while kids above the age of ten are linked with complex and bigger sets. Lego has managed to keep all young kids around the world busy. The company has also introduced several themes such as Star Wars, Lego Movie, and Toy Story. In the same vein, there are various categories of products such as STEM, Boats, Aircraft, Trains, Robots among others. Lego has also developed various educational materials. Kids can access a variety of video games. To engage online users, the company has also developed several web apps and games. It is located in U.S.A, China, U.K, Japan, and Australia.

Place

The headquarter of the company is located in Billund, Denmark. Other stores are located in Enfield, U.S.A, London, U.K, and Shanghai China (Campbell et al., 2011, 604). Lego Group operates its business around these five global hubs. In addition to that, the company also possesses five global manufacturing sites and several local offices. Some of these are retail locations. Approximately 60 stores in 18 Chinese cities belong to this company. There are numerous warehouses across the world. We have factories in Monterrey, Mexico, Hungary, and the Czech Republic. Finally, the company utilized e-commerce platforms to market its products.

Price

The company is associated with a premium pricing strategy. Lego is experiencing stiff competition from well-developed companies. In their quest to attract more customers, the company offers discounts to regular customers. The company uses quality raw materials which are expensive. In addition to that, more resources are spent on marketing. Because of the quality of products, they can charge premium prices. It offers a variety of deals to penetrate deeper and grow the customer base. Lego decides on the prices of its assets based on various factors. These factors range from the total number of pieces per set to the total cost of licensing. Statistical information about the population of a country also defines the prices of most Lego products. This means that the prices differ in different countries. Taxes also defines their goods.

Promotion

Lego is a brand that is well known across the world. The brand is highly recognized in many countries; which has contributed to heavy sales. Recently, the company has been investing heavily in marketing (Antorini et al., 2012, 73). It uses various marketing channels. In 2018, the total amount of money spent on promotion was approximately 2.8 billion Danish Krone. The company has a website that is used to reach customers all over the world. Due to the rise in digitization, the company is currently using digital channels. In the same vein, the company is also using social media to promote its products. Based on research that was recently conducted, the total number of Facebook followers is 13 million while YouTube followers were approximately 17 million. Public relations and media are also modes of promotion. The company formed a cooperation with Heroes boot camp in May 2019.

Recommendations

In 2017, the Lego Group of companies recorded a drop in sales. It was discovered that the company had a weaker brand name in well-established markets like the United States of America. The company is also facing stiff competition from well-established organizations. The company is operating under the principles of a premium pricing strategy. Lego Group cannot accommodate consumers from all walks of life due to its competitive prices. To survive in this modern competitive market, the company should come up with stronger strategies.

The secret is to “Create the next Lego”. Lego Group should put more resources on research and innovation. This will encourage creativity. They should embrace the idea of the millionaire dollar. Customers should be given a chance to be part of the company. This will promote brand loyalty. Based on research, it was proven that this is the most effective method of increasing the volume of sales. In addition to that, the company should devote a section for staff members which gives them the power to solve some issues. Finally, the company should come up with a more digital game to expand its customer base. Creatively departments should be allowed to implement various ideas on the ground. It is upon the managers to enforce new and modernized strategies.

Conclusion

The LEGO Group is a Danish toy manufacturing company specializing in the manufacture of Lego bricks. Based on research, the Lego group is the second world’s largest manufacturer of toys. It is a family-owned company whose origin can be traced back to Denmark. To inspire their fans, Lego Group uses imagination. The company is investing in research and innovation. Brand loyalty alongside a strong brand image has contributed to huge sales. Activities of LEGO Group are affected by internal and external factors. It is upon the managers to come up with an organization’s culture and structure. These strategies are meant to give clear guidelines to the employees. The relationship between the Chinese market and the Lego Group can be dated back to the 1980s. A sales company was established in China by the LEGO Group in 2012. The company is associated with a premium pricing strategy. Lego is experiencing stiff competition from well-developed companies. The secret is to “Create the next Lego”. Lego Group should put more resources on research and innovation. This will encourage creativity. They should embrace the idea of the millionaire dollar. Customers should be given a chance to be part of the company.

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